BILL NUMBER: AB 10	CHAPTERED  07/06/99

	CHAPTER   64
	FILED WITH SECRETARY OF STATE   JULY 6, 1999
	APPROVED BY GOVERNOR   JULY 6, 1999
	PASSED THE ASSEMBLY   JUNE 16, 1999
	PASSED THE SENATE   JUNE 15, 1999
	AMENDED IN SENATE   JUNE 15, 1999
	AMENDED IN ASSEMBLY   JUNE 2, 1999
	AMENDED IN ASSEMBLY   MARCH 23, 1999
	AMENDED IN ASSEMBLY   MARCH 1, 1999

INTRODUCED BY   Assembly Members Correa, Florez, Havice, Rod Pacheco,
Jackson, Nakano, Reyes, Soto, Wayne, and Maddox and Senators
Johnson, Brulte, Ortiz, Karnette, and Speier

                        DECEMBER 7, 1998

   An act to amend Section 23153 of, and to amend, repeal, and add
Section 23221 of, the Revenue and Taxation Code, relating to
taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 10, Correa.  Bank and corporation taxes:  minimum franchise
tax.
   The Bank and Corporation Tax Law generally imposes a franchise tax
on corporations doing business within the limits of this state,
including a minimum franchise tax on specified banks and
corporations, except as provided, and provides, for income years
beginning on or after January 1, 1999, for a minimum franchise tax of
$500 for the 2nd taxable year for any corporation, except as
specified, that has gross receipts, less returns and allowances
reportable to this state, of less than $1,000,000 for the income
year.  The reduced tax applies to any corporation that is a qualified
new corporation, as defined, incorporated on or after January 1,
1999.
   This bill would provide that for income years beginning on or
after January 1, 2000, every corporation, except as specified, that
qualifies to do business in this state on or after January 1, 2000,
shall not be subject to the minimum franchise tax for its first and
second taxable years.
   The Bank and Corporation Tax Law provides that a corporation that
incorporates under the laws of this state or qualifies to transact
interstate business in this state shall prepay a specified minimum
franchise tax of $800, except as provided.  That law also provides
that, for income years commencing on or after January 1, 1999, the
amount of the prepaid minimum franchise tax for a qualified new
corporation, as defined, shall be $300, unless its gross receipts, as
specified, or its tax liability, exceeds specified amounts.
   This bill would provide that every corporation that incorporates
under the laws of this state or qualifies to do business in this
state on or after January 1, 2000, and before January 1, 2001, shall
not be subject to the prepayment of that minimum franchise tax,
except as provided.  This bill would eliminate the prepayment of
minimum franchise tax provisions on January 1, 2001, except as
provided.
   This bill would take effect immediately as a tax levy.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 23153 of the Revenue and Taxation Code is
amended to read:
   23153.  (a) Every corporation described in subdivision (b) shall
be subject to the minimum franchise tax specified in subdivision (d)
from the earlier of the date of incorporation, qualification, or
commencing to do business within this state, until the effective date
of dissolution or withdrawal as provided in Section 23331 or, if
later, the date the corporation ceases to do business within the
limits of this state.
   (b) Unless expressly exempted by this part or the California
Constitution, subdivision (a) shall apply to each of the following:
   (1) Every corporation that is incorporated under the laws of this
state.
   (2) Every corporation that is qualified to transact intrastate
business in this state pursuant to Chapter 21 (commencing with
Section 2100) of Division 1 of Title 1 of the Corporations Code.
   (3) Every corporation that is doing business in this state.
   (c) The following entities are not subject to the minimum
franchise tax specified in this section:
   (1) Credit unions.
   (2) Nonprofit cooperative associations organized pursuant to
Chapter 1 (commencing with Section 54001) of Division 20 of the Food
and Agricultural Code that have been issued the certificate of the
board of supervisors prepared pursuant to Section 54042 of the Food
and Agricultural Code.  The association shall be exempt from the
minimum franchise tax for five consecutive income years, commencing
with the first income year for which the certificate is issued
pursuant to subdivision (b) of Section 54042 of the Food and
Agricultural Code.  This paragraph only applies to nonprofit
cooperative associations organized on or after January 1, 1994.
   (d) (1) Except as provided in paragraph (2), corporations subject
to the minimum franchise tax shall pay annually to the state a
minimum franchise tax of eight hundred dollars ($800).
   (2) The minimum franchise tax shall be twenty-five dollars ($25)
for each of the following:
   (A) A corporation formed under the laws of this state whose
principal business when formed was gold mining, which is inactive and
has not done business within the limits of the state since 1950.
   (B) A corporation formed under the laws of this state whose
principal business when formed was quicksilver mining, which is
inactive and has not done business within the limits of the state
since 1971, or has been inactive for a period of 24 consecutive
months or more.
   (3) For purposes of paragraph (2), a corporation shall not be
considered to have done business if it engages in other than mining.

   (e) Notwithstanding subdivision (a), for income years beginning on
or after January 1, 1999, and before January 1, 2000, every
"qualified new corporation" shall pay annually to the state a minimum
franchise tax of five hundred dollars ($500) for the second taxable
year.  This subdivision shall apply to any corporation that is a
qualified new corporation and is incorporated on or after January 1,
1999, and before January 1, 2000.
   (1) The determination of the gross receipts of a corporation, for
purposes of this subdivision, shall be made by including the gross
receipts of each member of the commonly controlled group, as defined
in Section 25105, of which the corporation is a member.
   (2) "Gross receipts, less returns and allowances reportable to
this state," means the sum of the gross receipts from the production
of business income, as defined in subdivision (a) of Section 25120,
and the gross receipts from the production of nonbusiness income, as
defined in subdivision (d) of Section 25120.
   (3) "Qualified new corporation" means a corporation that begins
business operations at or after the time of its incorporation and
that reasonably estimates that it will have gross receipts, less
returns and allowances, reportable to this state for the income year
of less than one million dollars ($1,000,000).  "Qualified new
corporation" does not include any corporation that began business
operations as a single proprietorship, a partnership, or any other
form of business entity prior to its incorporation.  This subdivision
shall not apply to any corporation that reorganizes solely for the
purpose of reducing its minimum franchise tax.
   (4) This subdivision shall not apply to limited partnerships, as
defined in Section 17935, limited liability companies, as defined in
Section 17941, limited liability partnerships, as defined in Section
17948, charitable organizations, as described in Section 23703,
regulated investment companies, as defined in Section 851 of the
Internal Revenue Code, real estate investment trusts, as defined in
Section 856 of the Internal Revenue Code, real estate mortgage
investment conduits, as defined in Section 860D of the Internal
Revenue Code, financial asset securitization investment trusts, as
defined in Section 860L of the Internal Revenue Code, qualified
Subchapter S subsidiaries, as defined in Section 1361(b)(3) of the
Internal Revenue Code, or to the formation of any subsidiary
corporation, to the extent applicable.
   (5) For any income year beginning on or after January 1, 1999, and
before January 1, 2000, if a corporation has paid five hundred
dollars ($500) for the second taxable year under this subdivision,
but in its second taxable year, the corporation's gross receipts, as
determined under paragraphs (1) and (2), exceed one million dollars
($1,000,000), an additional tax in the amount equal to three hundred
dollars ($300) for the second taxable year shall be due and payable
by the corporation on the due date of its return, without regard to
extension, for that year.
   (f) (1) Notwithstanding subdivision (a), every corporation that
incorporates or qualifies to do business in this state on or after
January 1, 2000, shall not be subject to the minimum franchise tax
for its first and second taxable years.
   (2) This subdivision shall not apply to limited partnerships, as
defined in Section 17935, limited liability companies, as defined in
Section 17941, limited liability partnerships, as defined in Section
17948, charitable organizations, as described in Section 23703,
regulated investment companies, as defined in Section 851 of the
Internal Revenue Code, real estate investment trusts, as defined in
Section 856 of the Internal Revenue Code, real estate mortgage
investment conduits, as defined in Section 860D of the Internal
Revenue Code, financial asset securitization investment trusts, as
defined in Section 860L of the Internal Revenue Code, and qualified
Subchapter S subsidiaries, as defined in Section 1361(b)(3) of the
Internal Revenue Code, to the extent applicable.
   (3) This subdivision shall not apply to any corporation that
reorganizes solely for the purpose of avoiding payment of its minimum
franchise tax.
   (g) Notwithstanding subdivision (a), a domestic corporation, as
defined in Section 167 of the Corporations Code, that files a
certificate of dissolution in the office of the Secretary of State
pursuant to subdivision (c) of Section 1905 of the Corporations Code
and that does not thereafter do business shall not be subject to the
minimum franchise tax for income years beginning on or after the date
of that filing.
   (h) The minimum franchise tax imposed by paragraph (1) of
subdivision (d) shall not be increased by the Legislature by more
than 10 percent during any calendar year.
  SEC. 2.  Section 23221 of the Revenue and Taxation Code is amended
to read:
   23221.  (a) Except as provided under subdivisions (b) and (f), a
corporation which incorporates under the laws of this state or
qualifies to transact intrastate business in this state shall
thereupon prepay the minimum tax provided in Section 23153, except
that any credit union shall thereupon prepay a tax of twenty-five
dollars ($25).  The prepayment shall be made to the Secretary of
State with the filing of the articles of incorporation or the
statement and designation by a foreign corporation.  The Secretary of
State shall transmit the amount of the prepayment to the Franchise
Tax Board.  The Franchise Tax Board shall certify to the Secretary of
State on an individual or class basis those domestic or foreign
corporations which are exempt from prepayment or for which prepayment
to the Secretary of State is waived.
   (b) (1) For income years commencing on or after January 1, 1997,
and before January 1, 1999, the amount payable by a qualified new
corporation under subdivision (a) shall be six hundred dollars
($600).
   (2) For income years commencing on or after January 1, 1999, and
before January 1, 2000, the amount payable by a qualified new
corporation under subdivision (a) shall be three hundred dollars
($300).
   (c) For purposes of this section, "qualified new corporation"
means a corporation that begins operation at or after the time of its
incorporation and that reasonably estimates that, for the income
year, it will have both gross receipts, less returns and allowances
reportable to this state, of one million dollars ($1,000,000) or less
and a tax liability under Section 23151 that does not exceed eight
hundred dollars ($800).  "Qualified new corporation" does not include
any corporation that began business operations as a single
proprietorship, a partnership, or any other form of business entity
prior to its incorporation.
   (1) The determination of gross receipts of a corporation, for
purposes of this section, shall be made by including the gross
receipts of each member of the commonly controlled group, as defined
in Section 25105, of which the bank or corporation is a member.
   (2) "Gross receipts, less returns and allowances reportable to
this state," means the sum of the gross receipts from the production
of business income, as defined in subdivision (a) of Section 25120,
and the gross receipts from the production of nonbusiness income, as
defined in subdivision (d) of Section 25120.
   (d) Subdivision (b) shall not apply to any corporation if 50
percent or more of its stock is, or will be upon the initial issuance
of stock, owned by another corporation.
   (e) (1) For income years commencing on or after January 1, 1997
and before January 1, 1999, if a corporation paid six hundred dollars
($600) under paragraph (1) of subdivision (b), but for its first
income year the corporation's tax liability under Section 23151
exceeds eight hundred dollars ($800), or the corporation's gross
receipts, as determined under paragraph (2) of subdivision (c),
exceed one million dollars ($1,000,000), an additional tax in an
amount equal to two hundred dollars ($200) shall be due and payable
by the corporation on the due date of its return, without regard to
extension, for its first income year.
   (2) For income years commencing on or after January 1, 1999, and
before January 1, 2000, if a corporation paid three hundred dollars
($300) under paragraph (2) of subdivision (b), but for its first
income year the corporation's tax liability under Section 23151
exceeds eight hundred dollars ($800), or the corporation's gross
receipts, as determined under paragraphs (1) and (2) of subdivision
(c), exceed one million dollars ($1,000,000), an additional tax in an
amount equal to five hundred dollars ($500) shall be due and payable
by the corporation on the due date of its return, without regard to
extension, for its first income year.
   (f) Every corporation that incorporates under the laws of this
state or qualifies to transact intrastate business in this state on
or after January 1, 2000, and before January 1, 2001, shall not be
subject to the amount payable under subdivision (a), except that any
credit union shall thereupon prepay a tax of twenty-five dollars
($25).
   (g) This section shall remain in effect only until January 1,
2001, and as of that date is repealed.
  SEC. 3.  Section 23221 of the Revenue and Taxation Code is added to
read:
   23221.  (a) Any credit union that incorporates under the laws of
this state or qualifies to transact intrastate business in this state
shall thereupon prepay a tax of twenty-five dollars ($25) as
provided in Section 23153.  The prepayment shall be made to the
Secretary of State with the filing of the articles of incorporation
or the statement and designation by a foreign corporation.  The
Secretary of State shall transmit the amount of the prepayment to the
Franchise Tax Board.  The Franchise Tax Board shall certify to the
Secretary of State on an individual or class basis those domestic or
foreign corporations that are exempt from prepayment or for which
prepayment to the Secretary of State is waived.
   (b) This section shall become operative and apply beginning on or
after January 1, 2001.
  SEC. 4.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
